The most prevalent form of fraud in the Forex market typically manifests itself through fraudulent brokers. These brokers, who are not authorized or licensed by any financial institution, falsely purport to provide trading services in Forex and other financial markets.
Perpetrators of such scams often employ the following tactics to lend an air of legitimacy to their illicit activities.
Some scammers never mention any specific regulatory information, such as the name of the regulator and license number, on their websites, social media, or promotions, only occasionally using terms such as "legitimate," "regulated," or "registered" in an inconspicuous position.
When searching for license details, one can use the office location or telephone number provided by brokers to find the financial regulator of the corresponding country or region. However, some fraudsters do not even disclose such necessary contact.
To verify license details, one can utilize the office address or telephone number provided by brokers to identify the financial regulator of the corresponding country or region. However, some fraudsters may not disclose such essential contact information.
If a broker neither mentions its regulatory details nor reveals its location, it is bound to be a fake entity.
Specifically, some beginners may not even be aware of the requirement for financial brokers to be regulated or be cognizant of the neglect of regulation, ending up being the victim of an investment scam.
To reduce investor wariness, some unauthorized entities lie about the regulatory status.
At times, they may display the logo of a financial regulator on their website, insinuating that they are authorized by the mentioned watchdog. On other occasions, they might falsely assert to be regulated by a well-known financial authority, while fabricating the address and licence number. Even more audaciously, they may fabricate a non-existent regulator, or create a counterfeit query domain name for the victims to "verify."
Once investors believe in the brokers, the crooks would be taken as legitimate companies, and the unreasonable demands and behavior of these companies would not raise suspicion, thus making it even more difficult for victims to find their situation.
In fact, no relevant regulatory info claimed by criminals could be found in any regulators' portals.
Not all government agencies are involved in the regulation of financial activities, and similarly, not all financial authorities oversee Forex activities.
The following are the names of agencies/licences that are often mentioned by fraudulent broker when they misrepresent their regulatory status:
The Marshall Islands Registry (IRI)
Financial Services Authority - St. Vincent & the Grenadines (SVG FSA)
The Financial Crimes Enforcement Network (FinCEN) and its Money Services Business (MSB) licence.
Financial Industry Regulatory Authority (FINRA)
The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).
Please note that the above agencies are real. However, even if a broker's registration information are found on these portals, it does not mean that the broker is regulated since the agencies are not Forex regulators.
What's more, the entities tagged as "not a NFA member" on the National Futures Association register list is not actually subject to U.S. financial regulation.
The SVG FSA has made it clear that it does not regulate foreign exchange activities.
Investors need to be informed that whther the regulators mentioned by brokers have authority to regulate retail foreign exchange trading activities.
On some ocations, scammers "frankly" admit that they are not regulated and promise investors that they are in the process of applying for a licence. However, no one knows if they are actually applying for a licence.
There are also criminals who make excuses and falsely claim that their trading activities do not need to be authorised or regulated.
Instead of trusting in a broker that could only "promises", it is better to look for a company that has already obtained a licence.
Fake broker may steals information from genuine companies, such as trademarks, regulatory licence numbers, company names, etc., to put a mask on themselves and make traders believe they are dealing with well-known and legitimate companies. Such crookers are often referred to as clones or imposters by regulators.
Identifying a clone is not that diffuiclut. One of the most easy ways is to contact the genuine licensed company for verification. Most of the contact details for genuine firms can be found on the regulator's web portal.
Regulators such as the FCA and ASIC, who update their warning lists from time to time, will also flag such fraudulent entities as "clones" or "imposters" for investors to view.